Financial regulation

UBS Group becomes first global bank to apply for majority control of Chinese securities venture

Application to increase stake in UBS Securities Company under review, says CSRC

PUBLISHED : Thursday, 03 May, 2018, 7:33pm
UPDATED : Thursday, 03 May, 2018, 10:52pm

China’s top securities regulator has accepted and is reviewing an application by the UBS Group to increase its stake in its Chinese securities venture to 51 per cent, after the Swiss bank became the first global financial institution to apply for a controlling share in its local operations.

The China Securities Regulatory Commission announced on its website on Wednesday night that it was reviewing UBS Group’s application to increase its stake in UBS Securities Company, its Chinese joint venture.

“China is a key market for UBS. The further opening up of China’s financial sector represents great opportunities for our China businesses, including investment banking, wealth management and asset management. The Chinese government’s decision to allow foreign companies to take up to 51 per cent in securities joint ventures is another important step in the opening up of China’s markets,” UBS Group said in a written response to the South China Morning Post.

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“We are pleased to confirm a key milestone in this process, with UBS Securities submitting an application to the CSRC to allow UBS AG to increase its stake in the joint venture to 51 per cent,” said the company.

UBS Group’s application comes just days after the CSRC revealed details over the weekend about the plan to allow majority control of onshore securities ventures by foreign companies. Currently, UBS Group is the second-largest shareholder of UBS Securities Company, with a more than 20 per cent stake and management control of the venture.

Beijing Guoxiang Asset Management, an asset management unit of the Beijing city government, owns 34.73 per cent.

Sergio Ermotti, the UBS chief executive, said earlier this year that the bank planned to grow its business in the region and increase its headcount.

Last month, the company said it would nominate Fred Hu, the founder of Primavera Capital and former chairman of Greater China at Goldman Sachs, as a new member to its board at its upcoming annual general meeting this month.

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“With Fred Hu’s nomination, we are proposing an extremely well qualified candidate from Asia, an important growth market for UBS,” Axel Weber, chairman at the Swiss banking group, has said in a statement previously.

The further opening up of China’s financial sector represents great opportunities for our China businesses, including investment banking, wealth management and asset management
UBS Group

In November, Beijing announced soon after a visit to China by US President Donald Trump that it would relax some of the restrictions on the foreign ownership of Chinese financial companies, as part of a plan to further open the country’s vast financial sector.

The proposed relaxations include measures allowing foreign investors to own up to 51 per cent of Chinese securities firms, fund managers and futures companies, before removing the cap entirely three years after the new limit takes effect.

China currently sets a 49 per cent cap on the foreign ownership of most onshore securities firms. When it joined the WTO in 2001, it promised to quickly open up its financial markets to outside capital.

A number of western banks, including Goldman Sachs, Morgan Stanley, Citi Group, Credit Suisse and Deutsche Bank, currently have stakes in onshore Chinese securities ventures.

The Morgan Stanley chief executive, James Gorman, said in November the companies will seize control of China businesses. JPMorgan, which sold its stake in its China business late last year, also signalled interest in an interview about re-establishing a local entity that it has control over.